Senate candidate's business got $4 million in special aid

2010-08-26T20:00:00Z Senate candidate's business got $4 million in special aidThe Associated Press The Associated Press
August 26, 2010 8:00 pm  • 

 

MILWAUKEE (AP) — U.S. Senate candidate Ron Johnson regularly criticizes government subsidies to businesses, saying the financial help interferes with the free market. A plastics company co-founded by the Republican, however, received its own form of aid decades ago, county documents show.

Pacur LLC received $4 million in low-interest loans in the 1980s to buy equipment and expand its plant, according to Winnebago County documents obtained Thursday by The Associated Press. The loans were part of a state-run program in which tax-free bonds are sold to investors, and the proceeds lent to a company at low interest rates.

Pacur benefited from the program twice. The company, which makes plastic packaging materials, won approval in 1983 to receive $1.5 million through the sale of the special bonds. About two years later the Oshkosh company was approved to receive another $2.5 million.

On the campaign trail, Johnson criticizes subsidies, saying it should be up to customers — not the government — to pick winners and losers in the business world. He also told WKOW-TV he never asked for government aid for his business.

"I have never lobbied for some special treatment or for a government payout," Johnson said.

Johnson is considered the leading Senate candidate in the upcoming GOP primary, which will determine who challenges Sen. Russ Feingold, the Democratic incumbent, in November.

Feingold's campaign said the bond documents call into question the integrity of Johnson's campaign, especially after Johnson opposed extending unemployment benefits and spoke out against the stimulus bill.

"What we learn through all this is, government assistance is great when it's for him and not for anybody else," said John Kraus, a spokesman for Feingold's campaign.

That's an inaccurate spin, Johnson's campaign countered. The $4 million isn't government assistance because it came from investors who bought the bonds, not from a federal handout, spokeswoman Sara Sendek said.

"This is a loan, not a government subsidy. Pacur received a loan and they paid it back," Sendek said. "I can't understand why Sen. Feingold is spending all his time criticizing when Ron Johnson is the candidate creating jobs in the state."

The bonds in question are industrial-development revenue bonds, or IRBs. Most state and local governments offer them as a way to help local businesses grow and thrive.

When investors make money on corporate bonds they have to pay taxes on their gains. But IRBs, like municipal bonds, are tax-free. So investors are willing to accept a lower interest rate because they're saving money by not paying taxes.

That means the company receiving the revenue from an IRB is paying a lower interest rate — typically 1.5 percent to 2.5 percent less, according to the Wisconsin Department of Commerce — than if it sought a loan from a commercial bank.

So if Pacur received $4 million in low-interest loans through this program, is it fair to call that money a government subsidy? Several academics said it is a subsidy, although indirectly.

"Tax-free bonds allow a borrower to borrow at a lower rate," said Andrew Reschovsky, a professor of applied economics at the University of Wisconsin-Madison. "That's a subsidy from normal borrowing."

There's less uncertainty about a separate $75,000 federal grant that went to the company that was the precursor to Pacur. Wisconsin Industrial Shipping Supplies Inc. received the money in 1979 to build a railroad line to the company, which was renamed Pacur several months later.

It's hypocritical for Johnson to criticize government aid to private companies when his own company received federal help, said Deirdre Murphy a spokeswoman for the Democratic Senatorial Campaign Committee.

But Sendek said Democrats' criticism simply reflects an anti-job, anti-business attitude.

"Sen. Feingold should be praising Ron Johnson and the hard workers at Pacur for everything they have done to contribute to job creation and growing the economy in Wisconsin — not demonizing them," she said.

Johnson squares off against Watertown businessman Dave Westlake and Milwaukee plumber Stephen Finn in the Republican primary Sept. 14. The winner takes on Feingold and Independent Rob Taylor, a Cumberland software engineer, in the general election Nov. 2.

Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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